Chapter 13 Vs Chapter 7
The primary difference between Chapter 13 bankruptcy and Chapter 7 bankruptcy is that Chapter 13 is a reorganization of the debtors finances to pay down liabilities over time, according to a repayment plan. Chapter 7 bankruptcy involves liquidation of the debtors assets to provide lump-sum payments usually pennies on the dollar to creditors.
While Chapter 13 bankruptcy requires a debtor to continue making payments to debtors for several years, according to the repayment plan, before any debts can be discharged, Chapter 7 bankruptcy discharges debts immediately upon liquidation of the debtors bankruptcy estate.
Chapter 13 has the benefit of being less damaging to the debtors credit, and allows a debtor to keep assets and properties that would otherwise be sold off in a Chapter 7 bankruptcy.
How Bankruptcy Works In Florida
In most respects, filing for bankruptcy in Florida isn’t any different than filing in another state. The bankruptcy process falls under federal law, not Florida state law, and it works by unwinding the contracts between you and your creditorsthat’s what gives you a fresh start.
But Florida’s laws come into play, too, in a significant way. They determine the property you can keep in your bankruptcy case. You’ll also need to know other filing information, which we explain after going over some basics.
Advantages Of Chapter 13
Chapter 13 offers individuals a number of advantages over liquidation under chapter 7. Perhaps most significantly, chapter 13 offers individuals an opportunity to save their homes from foreclosure. By filing under this chapter, individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time. Nevertheless, they must still make all mortgage payments that come due during the chapter 13 plan on time. Another advantage of chapter 13 is that it allows individuals to reschedule secured debts and extend them over the life of the chapter 13 plan. Doing this may lower the payments. Chapter 13 also has a special provision that protects third parties who are liable with the debtor on “consumer debts.” This provision may protect co-signers. Finally, chapter 13 acts like a consolidation loan under which the individual makes the plan payments to a chapter 13 trustee who then distributes payments to creditors. Individuals will have no direct contact with creditors while under chapter 13 protection.
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Myth: You Can Easily Pay No Money Down
Another popular reason for choosing Chapter 13 is because it can often filed with âno money down.â
Unlike Chapter 7 where legal fees always must be paid up front, Chapter 13 attorney fees can be extended over the 5 year life of the plan. As a result, many law firms allow debtors who cannot afford Chapter 7 to file for Chapter 13 with âno money down.â
Though that might sound like a good idea if youâre cash strapped, but it rarely is. A recent national study suggests that âno money downâ filers pay $2,000 more and have their cases dismissed at a rate 18 times higher than if they had filed Chapter 7.
That means they donât get the relief from the debt that prompted them to file bankruptcy in the first place.
Nevertheless, attorneys will still offer this option because there is at least a possibility that youâll succeed. And even if you fail, the attorney can still generate fees from the fees that are paid before dismissal.
Get Help With Chapter 13 In Florida Today
Its important to note that Chapter 13 bankruptcy has consequences. It will deeply impact your credit score for no more than seven years. However, this is better than Chapter 7, which stays on your credit score for no longer than 10 years.
Filing for Chapter 13 in Florida is a complex process. There are classes you must undertake, filing fees that must be paid, and evidence that must be shown in order to qualify. Thats why its so important to speak with an experienced lawyer if youre considering filing for Chapter 13 along the Treasure Coast.
For over 30 Years, at Hoskins, Turco, Lloyd & Lloyd, our experienced bankruptcy lawyers have been helping members of our community to explore all of their options when they find themselves in financial trouble. If youre considering Chapter 13 in Florida, call us at 866-460-1990 or contact us online for a free, no-obligation consultation today.
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Who Should File Chapter 13 Bankruptcy
Many people think of bankruptcy court as the final stop on a path to financial ruin, the only option left when repaying debts seems impossible. But theres hope even in bankruptcy, and Chapter 13 of the federal bankruptcy code offers the closest thing to a soft landing.
Sometimes called the Wage Earners Bankruptcy, Chapter 13 allows those with enough income to repay all or part of their debts as an alternative to liquidation. Its bankruptcy for those whose biggest problem is dealing with creditors demands for immediate payment, not lack of income.
One of its most attractive features is the chance to keep your home after Chapter 13 bankruptcy as long as you can pay the mortgage and any amount required by your Chapter 13 repayment plan..
Under Chapter 13, people have three to five years to resolve their debts while applying all their disposable income to debt reduction. The option allows applicants to eliminate unsecured debts while catching up on missed mortgage payments. Short-circuiting home foreclosure is one of the options most attractive features. Though keeping your home can be a major relief, youre required to spend years living under the supervision of a court-appointed trustee who will collect and distribute your payments.
Filing Chapter 13 Bankruptcy In Florida
Florida Chapter 13 Bankruptcy: Another name for a chapter 13 bankruptcy is a wage earners plan.
This type of bankruptcy enables people with a steady job and steady income to work with a court and establish some type of payment plan to get out of serious debt.
Instead of a complete discharge, the idea of a Florida chapter 13 bankruptcy is to make an individuals debt more manageable. Typically, the agreement to pay back debt works on a 3-year to 5-year plan, but cannot exceed 5 years.
To qualify for a chapter 13 bankruptcy in Florida any individual can file as long as their unsecured debt is less than $307,675 and secured debts are less than $922,975.
For Florida residents, there are many advantages to filing a Florida chapter 13 bankruptcy.
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Is Bankruptcy Better Than Debt Settlement
Determining how to handle your debts is not an easy decision. It is essential to evaluate each option carefully to ensure that you choose the best option. The surest way to achieve this goal is to seek the guidance of a legal expert who knows the pros and cons of debt settlement and bankruptcy. By seeking the services of an experienced Tampa bankruptcy attorney, you can help ensure that you consider every angle during the decision making process.
Choosing The Right Bankruptcy Chapter For You In Florida
Most people file either Chapter 7 or Chapter 13. If you don’t know the differences between the two, you’re not alone. The short explanation below and our handy Chapter 7 versus 13 chart will help clear things up.
Chapter 7 bankruptcy.Chapter 7 is often a bankruptcy filer’s first choice for several reasons. It’s quickit only takes a few months to complete. And it’s cheapyou don’t pay anything to creditors. It works well for those of us whose property consists of the essential items needed to live and work.
People with more assets could lose them, however, especially if they own unnecessary luxury items. For instance, you might have to give up your RV, baseball card collection, or timeshare in the Bahamaseven your house or vehicle if you have too much equity in it or you’re behind on the payments. Unlike Chapter 13, Chapter 7 doesn’t have a payment plan option for catching up on late mortgage or car payments. So you could lose your home or car if you’re behind when you file.
Caution for businesspeople. Be sure to learn about the ins and outs of small business bankruptcies. The principles discussed apply to consumers only.
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Your Obligations Under A Chapter 13 Bankruptcy Plan
Learn which debts you must pay back when you file for Chapter 13 bankruptcy.
To begin a Chapter 13 bankruptcy, you fill out a packet of forms mostly the same forms as you would use in a Chapter 7 bankruptcy listing your income, property, expenses, and debts. You file these forms and paperwork with a nearby bankruptcy court. You must also file a workable payment plan proposing how you plan to handle your debts over the payment plan period.
You must also file your tax return for the previous year, proof that youve filed your tax returns for the last four years, and a certificate showing that youve completed credit counseling with an agency approved by the United States Trustee .
Under a Chapter 13 plan, you make payments, usually monthly, to the bankruptcy trustee, an official appointed by the bankruptcy court to oversee your case. The trustee in turn pays your creditors and collects a statutory commission based on the amounts paid out under your plan. You must make every payment, on time, in order to successfully complete your plan and get a discharge of your remaining debts.
Discover The Benefits Of The Chapter 13 Repayment Plan
Under Chapter 13 bankruptcy, you are consolidating debt so that you can easily manage payments to creditors. Some provisions included in a Chapter 13 bankruptcy are:
- A plan to repay a percentage of unsecured debt like medical bills and credit card debt.
- Judgments against you within a specified amount of time.
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Documents Needed For Chapter 7 And Chapter 13
You will need access to information to complete the bankruptcy paperwork. Additionally, the bankruptcy trustee will require documents to verify your petition was correct. Therefore, prior to filing bankruptcy, you should compile the following information:
- A list of all your creditors, the nature of the debt, the amount owed to each, and their mailing addresses.
- Your source of income, how often you are paid, and how much you are paid. Additionally, the same income information will be required for your spouse. Your spouseâs information is needed even if your spouse is not filing bankruptcy with you. This is necessary for the court, the trustee, and your creditors to determine your household financial situation.
- A list of all your property .
- A detailed list of your monthly living expenses, such as food, shelter, clothing, transportation, taxes, medicine, etc. These expenses must be reasonable and necessary for family maintenance.
How Does A Chapter 13 Work In Florida
When you file a Chapter 13 bankruptcy petition, the court assigns a case number and notifies your creditors that you have filed for bankruptcy relief. Your creditors must then work within the bankruptcy court to resolve the debt you owe to them. Creditors may not continue collection efforts or begin new collection actions without court approval. Therefore, filing a Chapter 13 petition stops repossessions, foreclosures, wage garnishments, collection lawsuits, and other forms of debt collection immediately.
As part of your bankruptcy filing, you must file a proposed Chapter 13 plan. Your bankruptcy plan provides the court and your creditors the details of how you intend to reorganize your debt. In most cases, your Chapter 13 plan payment will cover the payment for car loans, taxes, back child support, past due alimony, credit cards, medical debts, and other unsecured debts.
Mortgages on your home or other real estate are typically paid directly to the creditor outside of the bankruptcy plan. However, you may be able to eliminate the lien of a second mortgage if you meet the requirements for lien stripping, which we will discuss in further detail below.
The court must approve your plan therefore, amendments may be necessary. Our Daytona bankruptcy attorney has extensive experience calculating bankruptcy plan payments. We propose the lowest plan payment allowable by law to help ensure you do not pay more than is required based on your financial situation.
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How To File Chapter 13 Bankruptcy In Florida Determining Your Eligibility
Before you file for chapter 13 bankruptcy in Florida, youll need to ensure that you meet the state requirements. Perhaps the most important of these is that you are able to comply with the repayment plan set up for you during the bankruptcy. If your total debt cannot be consolidated into a monthly sum that you can feasibly pay, you will not qualify for a chapter 13 bankruptcy.
There are other financial requirements for eligibility for chapter 13 bankruptcy, including having $419,000 or less in unsecured debt and $1,277,000 of secured debt.
Some examples of unsecured debt include:
Secured debts are any in which the creditor has an interest in your assets to guarantee. These debts typically require you to use some type of collateral to take them out and may result in the loss of this asset if you are unable to repay the amount borrowed.
Keep in mind, if you do not qualify for chapter 13 bankruptcy you may still be eligible for chapter 7 bankruptcy or other solutions. Talk to your legal counsel about your options and which is the best fit for your circumstances.
Debt Limits For Chapter 13
There are debt requirements to file Chapter 13 bankruptcy in Florida. Unsecured debts must be less than $394,725, and secured debts must be less than $1,184,200. Secured debts are loans that have collateral, such as car loans and mortgages. On the other hand, unsecured debts have no collateral. Examples of unsecured debts are medical bills and credit cards. The amount of debt allowed changes frequently. For information on future changes, .
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Myth: You Get To Keep Your Stuff
One of the most popular reasons for filing for Chapter 13 is to keep oneâs assets like a home or a car. âChapter 13 is generally a âkeep your stuffâ chapter,â says Bert Benham, a Memphis bankruptcy attorney.
The reality, however, is that because roughly two-thirds of Chapter 13 cases fail, most of the time Chapter 13 does not help you keep your property. Desperate Chapter 13 filers can spend years and multiple bankruptcy cases trying to save a car from repossession.
Take this story of a Memphis resident, interviewed by Pro Publica, who filed for Chapter 13 four times in the past 7 years to hold on to her car:
The first time, she lost her job a year and a half after filing, and her case was dismissed after she fell behind. She immediately filed again to keep the car for job interviews, using unemployment benefits to make the payments until she couldnât. She then filed a third time.
Finally in 2014, after her third dismissal, she got a new part-time job paying $11 an hour and filed again. She still has two years of payments to go and will have spent most of her 30âs trying to hold on to her car. âIf Iâd known,â she said, âI just would have let my car go.â
Considering how few Chapter 13 cases result in discharge, how much you are willing to pay for the slim chance of protecting your property in Chapter 13?
Print Your Bankruptcy Forms
Most people who file for bankruptcy in Florida will have to print about 23 different forms if theyâre filing on their own plus whatever local Florida bankruptcy forms their district requires. If you donât have a printer at your house, you should go to a local Staples or Kinkos and try to print your forms there.
You can also try to ask around if a friend has a printer or contact your local Florida public librarian to let them know that youâre filing bankruptcy in Florida and need their assistance with printing. Unfortunately, the Florida Bankruptcy Courts donât allow filers to use the printers at the courthouse. If you have a bankruptcy attorney, theyâll file your bankruptcy forms with the court electronically, so you donât have to worry about printing out the forms yourself.
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I was very hesitant to go through the procedure of bankruptcy, especially at this late age of my life of the close to retirement years. Going through difficult personal health and family events made this very hard, yet every person I came in contact at the Law offices of Attorney Walter Benenati made me feel at ease. They were always quick to answer any questions. Even one time I was shocked I emailed the office and not even a couple of minutes later the attorney called to answer my question. My 17 year old son, was next to me and he was mom did that just happen? Every step of the way they were with me. They always informed me of any changes etc. So appreciated communication and help from Olga, Maria, Zumary, Stephanie, Jennifer and Chris. I am extremely grateful to Denisse B. & Attorney Claribel Acosta for helping me so at ease with the transitions and process of it all till the end. These girls rock!!! Great communication, Great Service, forever grateful for the blessing of the Benenati Law Office for this Season of my Life. Trust me , Attorney Walter Benenati was the right choice for me and it will be for you too.
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